Seven year contract: Venezuelan company is large supplier of China´s third biggest steelmaker.

A Chinese worker past by steel products at a steel mill.(AP Photo)

Wuhan Iron & Steel Group, China’s third-biggest steelmaker, said it will buy iron ore from Corp. Venezolana de Guayana at a lower price than what Vale SA , the world’s largest supplier, is charging.

The price will be at least $20 less for each dry metric ton, compared with what Vale is charging Japanese and South Korean steelmakers in the third quarter, Wuhan Steel said today in a statement on its website, without giving details.

The two companies signed a supply contract in October, paving the way for China, the largest buyer of iron ore, to set prices separately from the rest of the world. Vale, Rio Tinto Group and BHP Billiton Ltd., the three biggest suppliers, this year abandoned a 40-year custom of setting annual prices in favor of quarterly pacts, ignoring protests from Chinese steelmakers.

“This is the first-ever contract under China prices,” Wuhan Steel said in the statement. “It’s also a significant starting point to move away from control by the world’s top three mining giants.”

Wuhan in October agreed to buy more than 40 million tons of ore in total under a 7-year contract with the Venezuelan company, also known as CVG, the statement said. The average cost for the ore arriving at Wuhan’s plants was 668 yuan ($99) per dry ton in 2009, lower than the spot market, it said.